Standing Committee E

[Mr. Win Griffiths in the Chair]

Health and Social Care (Community Health and Standards) Bill

Clause 14 - Authorised services

John Hutton: I beg to move amendment No. 148, in
clause 14, page 6, line 14, leave out from 'for' to end of line 17 and insert
'purposes related to the provision of health care.
 ( ) But the authorisation must secure that the principal purpose of the trust is the provision of goods and services for the purposes of the health service in England.'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment (a) to the proposed amendment, in 
line 5, leave out 'in England'. 
Amendment No. 2, in 
clause 14, page 6, line 18, leave out subsection (3). 
Government amendment No. 149. 
 Amendment No. 3, in 
clause 14, page 6, line 23, leave out 'or require'. 
Amendment No. 4, in 
clause 14, page 6, line 27, leave out subsection (6). 
Amendment No. 5, in 
clause 14, page 6, line 37, leave out subsection (7). 
Amendment No. 11, in 
clause 15, page 7, line 18, leave out subsection (5). 
Government amendments Nos. 256, 257 and 259.

John Hutton: Amendments Nos. 148 and 149 take us back to that happy time long ago when we started deliberations on this Bill, and to an issue that hon. Members on both sides of the Committee have raised and to which I promised to give further consideration.
 Under clause 14(1) and (2), the regulator has discretion over whether to authorise NHS foundation trusts to provide goods and services, for purposes relating to health care, that are not provided to the NHS in England, including services to the NHS in Wales, Scotland and Northern Ireland. There is a proviso that their principal purpose is to provide health care services to NHS patients in England. 
 The effect of amendment No. 148 would be to remove any discretion that the regulator had about the provision of other health care services. It says that every NHS foundation trust must be authorised to provide health care services, including services for NHS patients from other parts of the United 
 Kingdom. As with the current clause, it is subject to the requirement that provision of services to NHS patients in England remains the principal purpose. 
 As we discussed what seems to have been a long time ago, the Bill will allow for people who live on the borders of Scotland to be treated in an English hospital if that is most convenient. More importantly, it allows for NHS patients from any part of the UK to receive care in national specialist facilities in England, if those facilities are being provided by an NHS foundation trust. I hope that that issue has now been put beyond any reasonable doubt. 
 That is also why I urge the Committee not to accept amendment (a), tabled by the hon. Member for West Chelmsford (Mr. Burns), which would delete the words ''in England'' from the revised text of clause 14(2). I hope that the hon. Gentleman will appreciate from my remarks that that is simply not necessary. 
 It may be that the hon. Gentleman intended his amendment to have a completely different effect, which was to make sure that NHS foundation trusts can be established for the purpose of providing health care services other than in England. That is not what we intend, as it is a devolved matter. As the hon. Member knows, the NHS in Wales and Scotland is a matter for the Welsh Assembly and the Scottish Executive, respectively, and they have made their position clear. 
 Government amendment No. 259 is a purely technical amendment that gives NHS foundation trusts the same powers as NHS trusts to provide accommodation and services to NHS patients. There is nothing new in this provision. Similar provisions have applied in the NHS since the National Health Service Act 1977; section 63 is the relevant provision. Obviously, foundation trusts will be limited to using these powers in a way that complies with the terms of that authorisation. 
 The new subsection 14(2)(a) is also relevant in this context, as it makes provision for NHS foundation trusts to carry on other non-clinical services and activities. Training and research is, of course, an important part of what the NHS does, and certainly falls within the Secretary of State's responsibilities under the 1977 Act. 
 Under the current version of clause 14(5), the regulator has discretion about whether to authorise educational, training and research activities by NHS foundation trusts. Government amendment No. 149 changes the emphasis by requiring the independent regulator to authorise such activities. The ''may'' is replaced with a ''must'', and I know that Opposition Members will welcome that. 
 Government amendments Nos. 256 and 257 are technical drafting measures, and are required to ensure that NHS foundation trusts can hold or receive gifts of property on trust to be used for the NHS in both England and Wales. NHS trusts enjoy that power at present, and NHS foundation trusts should not be in a different position. Amendment No. 256 allows them to accept gifts of property to be held on trust for the 
 purposes of the NHS in both England and Wales. Amendment No. 257 provides for the appointment of trustees for that property. 
 Amendments Nos. 2, 3, 4, 5 and 11 are more substantive and more objectionable to me. This is one of the areas—there will be several this morning—in which we come up against the ''freedoms and safeguards'' argument. We included the provisions in clause 14, which these amendments want to delete, precisely to balance the new freedoms with appropriate safeguards. I would go as far as to say that these amendments seem like wrecking amendments, but perhaps they are probing amendments. We will come to that point when Opposition Members speak to their amendments. 
 The amendments would remove important safeguards and put at risk the integrity of NHS services. I shall explain why I believe that to be so. In order to safeguard essential NHS services, under the terms of authorisation, the independent regulator will require NHS foundation trusts to offer certain protected services to NHS commissioners on a continuing basis. Protected services will include essential education, training and research programmes as well as NHS clinical services. The regulator will take decisions on what should be classified as protected, based on—among other things—the criteria set out in clause 14(7), which Opposition amendments would remove from the Bill. 
 A regulator must protect services in line with his general duty under clause 3, which we have already approved, to act consistently with the Secretary of State's duties under the 1977 Act. Amendments Nos. 2 and 3 would remove the regulator's powers to protect those services altogether. That would jeopardise the regulator's ability to protect the interests of NHS patients; therefore, the amendments are not acceptable to me, nor, I hope, to any of my hon. Friends. 
 The effect of the amendments could be that NHS patients would be denied essential services, which is clearly unacceptable. Amendments Nos. 4, 5 and 11 are consequential to amendments Nos. 2 and 3 and should be rejected for those reasons.

Chris Grayling: Welcome back to the Chair after our period away, Mr. Griffiths.
 As the Minister rightly said, amendments (a) and No. 2, together with Government amendment No. 148, take us back to our previous debate on the duties of NHS trusts in border areas to those patients who live in Scotland or Wales or to those coming from Northern Ireland to take advantage of services at specialist tertiary centres. 
 The Minister remarked how strongly Members on this side felt about the necessity to make provision in the Bill for trusts in those border areas to be mindful of the needs of people on the other side of borders. That is particularly important. We debated the Countess of Chester NHS trust, one example of a trust with a catchment area. The hon. Member for the City of Chester (Ms Russell) is in her place. 
 Since that debate, I have communicated with the trust and was told that approximately one third of the practices in Flintshire use the Countess of Chester hospital as their local referring hospital. About 10,000 patients from north Wales are admitted there annually, and there are approximately 40,000 out-patient attendances from the Flintshire area. Therefore, the importance of getting this part of the Bill correct is extremely significant. We cannot inadvertently set the wrong duties for those trusts. 
 I am greatly reassured by the Minister's comments. I have reflected on the various amendments before us and am happy to accept the Minister's word that the matter is being addressed. When the Bill goes to another place, I hope he will ensure that any previous elements of the Bill that have been debated can be adjusted accordingly so that the same duties are written throughout this measure. However, I am happy to accept that he has taken on board the points made in that debate, and I am grateful to him for doing so. 
 Amendment No. 3 is designed to take out the requirement to carry out research or to make facilities and staff available for the purposes of education and training. There is an important purpose behind that, and I hope that after I have spoken, the Minister will be willing to give it due consideration. Our concern is that this is unnecessarily prescriptive and could cause operational difficulties within the medical educational world owing to the unique structure that exists for our medical schools. 
 The Minister will be aware that in most cases medical schools are part of universities and, as such, they receive their funding from the Higher Education Funding Council for England. The decisions taken about the amount of funding that they receive ultimately flow from the Department for Education and Skills. In February 2003, the Secretary of State for Education and Skills decided to skim off 2.2 per cent. of the teaching budget to invest it in a deposit budget to promote a programme of social inclusion. He said that any institution, including medical schools, that does not have a full and proper wide-ranging programme of social inclusion in place for the next financial year will not receive any money from that pot. 
 As a result, medical schools have lost about 2.2 per cent. of their budget for this year. The medical schools are saying that they will have insufficient time between the issue of the edict by the Department for Education and Skills and the start of the next academic year to get such programmes in place.

Stephen McCabe: Will the hon. Gentleman inform the Committee of his position on social inclusion, since he finds this so objectionable?

Chris Grayling: The hon. Gentleman will not draw me down that line because I do not want to tread on the good offices of the Chair by taking the debate into the area of social inclusion.
 A decision taken in the Department for Education and Skills is reducing the amount of money available for medical schools to manage their affairs in the next financial year. Those medical schools are, almost invariably, inextricably linked to their local NHS trusts. Their medical professionals are involved in tuition, giving lectures and teaching students, but they also carry out research and undertake clinical work in the local NHS trusts. The decision to remove 2.2 per cent. of the teaching budget for this year will force medical schools to make decisions about staffing levels, financial commitments to research and the areas in which they can carry out research. That will have an impact, by definition, on the NHS trust that works directly alongside them. 
 A further example involves the recent research assessment exercise carried out by the HEFC into the effectiveness of the research carried out in medical schools and, correspondingly, the reallocation of funding in medical schools to focus resources on those areas that have particular expertise and excellence in delivering academic research. That change came into full effect during the financial year 2002-03. 
 As a consequence, over the past 12 months, Queen Mary's medical school—part of the University of London—was forced to significantly restructure its research base to concentrate its specialisms in certain areas. It had to lose some areas of research in which it had previously been involved, in order to make better use of its resources. In the past financial year, Queen Mary's received £2.6 million less research funding from HEFC, and was forced to streamline its medical activities as a result. All medical schools had to go through that same process of rationalisation, with one exception in London. 
 If a medical school is rationalised and the decision is taken that it no longer needs to carry out research in gynaecology, the gynaecological specialist who has been part of that medical school may decide to seek employment elsewhere because there is no longer a true purpose to being in that school. That specialist will want to work in a medical school in which gynaecology is still a strong part of the research base. 
 As a result, the local medical school will no longer have a gynaecologist, and the local NHS trust will no longer have that researcher, teacher and senior clinician who doubles up as an operational member of the national health service and a tutor of future doctors. Therein lies the problem, and therein lies the rationale behind amendment (a). 
 My concern, Mr. Griffiths, is that it risks putting an unrealistic tie on medical schools and on the trusts to which they are attached. Consequently, it would have an adverse, knock-on effect, which would create problems in the operational side of the NHS. The assessment or authorisation that the regulator put together could require an NHS trust to carry out research in several areas. That NHS trust would almost certainly carry out that research in conjunction with the medical school that sat alongside it. 
 However, when medical schools are forced to drop their half of research because of decisions taken to reallocate funding—decisions taken in the education arena rather than in the health care arena—inevitably some trusts will be forced to drop their half of research also. The risk is that the regulator could require a trust to do something that it was no longer able to do because the academic half of its work had disappeared due to funding changes. 
 The concern is not that it is wrong for the regulator to authorise trusts to carry out research on the provision of health care, but that the regulator could require trusts to carry out research that the trust was no longer able to do, because of changes within the medical school that sat alongside it. The purpose of the amendment is not to undermine the role of research in the NHS or to undermine the partnerships that rightly and properly exist between the NHS and medical schools, but to accept that changes can and do take place within the medical and research world. 
 A process of research assessment exercises takes place every few years, which inevitably reshapes the way in which medical research is carried out, so a requirement in law for the regulator to require a trust to do something might cause significant operational problems. I hope that the Minister will consider these issues and, if unwilling to accept the amendment, will give a commitment to explore ways in which flexibility could be left within the system to reflect changes that result from academic and educational decision-making rather than from NHS decision-making. 
 With regard to other amendments to rule out subsections (6) and (7), the Minster is right to say that there is a philosophical difference between the Opposition and those on the Government Benches about the way in which freedom should be deployed to foundation hospitals. Those subsections are further examples of parts of the Bill that significantly curtail the freedoms of foundation hospitals. The Government do not have the courage of their convictions. It is totally ludicrous to believe that hospitals will drop wholesale the services that they provide to their customers—the services for which their primary care trusts pay. They will continue to deliver as broad-ranging, effective and good a service as they can. Otherwise, frankly, once the national tariff is introduced, hospitals will not have the income. However, they will not have patients either, because doctors will go out of their way to move their patients elsewhere. Hospitals need work to do. They need to offer services. They need to be excellent at what they do, and they need to attract the right professionals. 
 There is no likelihood that giving hospitals freedom of choice over what services they offer and how they reflect the needs of their community would destroy the services they provide and undermine the NHS. It would do what I thought the Government intended to do, which was to say to local hospital managers that they could have the freedom to run their hospitals. Yet here are two subsections that clearly set up a process of deciding centrally—this time through a regulator rather than through the Secretary of State—what 
 hospitals can and cannot do. That is just plain wrong. The Government should have the courage of their convictions and give trusts freedom, rather than just a little flexibility to do some stuff around the margins. That is particularly important at a time when the Government are driving the process of reconfiguration within the health service. 
 It encourages services to move into community hospitals; greater diversity of provision; and the establishment of specialist clinics, such as the regional orthopaedic centre in my constituency, and the diagnostic and treatment centres that are being set up around the country. 
 The Government say that they are trying to create a flexible environment for health care, but they are not willing to give their hospitals the freedoms that they will need to respond, adapt and develop in that environment. There is no need to straitjacket hospitals by giving the regulator the duty to decide on the range of services. We could and should give foundation hospitals the freedom to meet their own local needs. My party does not believe that the Government are doing that in this clause. 
 Given the Minister's comments, I shall not press amendment (a). 
 Amendment agreed to.

John Hutton: I beg to move amendment No. 252, in
clause 14, page 6, line 17, at end insert—
 '(2A) The trust may also carry on activities other than those mentioned in subsection (1), subject to any restrictions in the authorisation, for the purpose of making additional income available in order to carry on its principal purpose better.'.

Win Griffiths: With this it will be convenient to discuss the following:
 Government amendment No. 253. 
 Amendment No. 7, in 
clause 15, page 7, line 7, leave out 
 'which was an NHS trust'. 
Amendment No. 8, in 
clause 15, page 7, line 8, leave out subsection (2). 
Government amendment No. 254. 
 Amendment No. 266, in 
clause 15, page 7, line 8, leave out from 'that' to end of line 11 and insert 
 'no services be provided to a patient other than an NHS patient, other than in circumstances prescribed in subsection (2A). 
 (2A) Where a certificate issued by the lead clinician in that speciality states that the services so provided are not needed by an NHS patient with equal or greater clinical need.'. 
Amendment No. 195, in 
clause 15, page 7, line 11, at end insert 
 'or 25 per cent.,whichever is the higher'. 
Amendment No. 9, in 
clause 15, page 7, line 12, leave out subsection (3). 
Amendment No. 10, in 
clause 15, page 7, line 15, leave out subsection (4). 
 Amendment No. 414, in 
clause 15, page 7, line 15, after 'means', insert '(a)'. 
Government amendment No. 255. 
 Amendment No. 415, in 
clause 15, page 7, line 17, at end, insert 
 ', and 
 (b) other income from private practice received by an NHS foundation trust whether directly or from bodies or persons undertaking or managing private practice in conjunction with that NHS foundation trust or from premises owned by that NHS foundation trust.'. 
Amendment No. 262, in 
clause 15, page 7, line 17, at end insert— 
 '(4A) Each NHS foundation trust must produce annually a comprehensive and publicly available report which separately identifies all income received from the provision of any and all private goods and services. 
 (4B) Each NHS foundation trust must produce annually a comprehensive and publicly available account of the costs to the trust of all goods and services provided privately.'.

John Hutton: We have already discussed Government amendments Nos. 148 and 259, and how they clarified that NHS foundation trusts have the powers to provide health care and related services. Government amendment No. 252 furthers that clarification. The powers that we suggest should be in the Bill parallel the current income-generation powers of NHS trusts. In moving this amendment, I see nothing in the Bill that will allow an NHS foundation trust to change the fact that NHS patients receive care that is free at the point of use and delivered on the basis of need rather than the ability to pay. Hon. Members will have read around the Bill, and it should be clear that any income-generating activity must be carried out in a way that complies with the terms of the NHS foundation trusts' authorisation—in particular, the provisions of clause 15, which relate to the capping of private patient activity.
 Amendments Nos. 253 and 254 are technical drafting amendments. Amendment No. 253 ensures that the independent regulator has discretion about whether he or she can restrict goods and services that are not provided to the NHS in England. Without that amendment, the regulator would be required to restrict provision of all services that are not English NHS services, including the restriction of services to the NHS in Wales, Scotland and Northern Ireland. Amendment No. 254 is consequential to amendment No. 253; as ''must'' becomes ''may'', the duty becomes apparent. 
 Opposition amendments Nos. 8, 9 and 10 would effectively abolish the private patient cap. NHS foundation trusts will have a primary purpose to provide services to NHS patients based on need rather than the ability to pay, and free at the point of use. We must ensure that NHS foundation trusts continue to focus on the needs of NHS patients, without distracting management and clinical time and effort from the NHS. The Bill is not designed to prevent NHS foundation trusts from undertaking non-NHS activity. Our priority is NHS patients. The Government will welcome applications from hospitals 
 that are committed to ending their private work. Paragraph 3.16 of ''A Guide to NHS Foundation Trusts'' states that 
''the Government will be particularly keen to see NHS Foundation Trusts applications that propose to convert existing NHS facilities currently wholly used for paying patients into facilities for the exclusive use of NHS patients.'' 
As drafted, the clauses will place a cap on the income derived from the provision of services to private patients as a percentage of total income. They will prevent those NHS foundation trusts that are NHS trusts from doing a higher proportion of private work than they do today. That will ensure that NHS foundation trust managers and staff focus their efforts on NHS patients to ensure that maximum use is made of all NHS facilities, and that NHS capacity will grow for NHS patients. It is not the role of the NHS to encourage the provision of private health care; its role is to treat NHS patients. These amendments put that primary purpose at risk by allowing NHS foundation trusts to increase the proportion of private clinical work that they can undertake. 
 Amendment No. 7 applies clause 15 to NHS foundation trusts that were not previously NHS trusts. If the purpose of that amendment is to give the regulator powers to restrict the provision of goods and services generally, it is not necessary. The regulator already has those powers under clause 6(3) and clause 14. 
 Amendment No. 266 would remove the cap on private charges and replace it with a system that offers—at best—a woolly attempt to give priority to the needs of NHS patients over those of private patients. However, anyone looking at that amendment will immediately recognise that it is fraught with some profound and technical difficulties, not least the difficulty of interpreting the definition of lead clinician and what would happen if a lead clinician was also the consultant offering the private bed. Who would arbitrate if there were a conflict of interest? I understand the point of the amendment, but it would be a bureaucratic nightmare that would be impossible to implement let alone monitor, and those are rather fundamental disadvantages to it.

Andrew Lansley: I understand that the Minister's purpose in having a cap on private charging is to prevent it rising as a proportion of the income of an NHS foundation trust. If the income of an NHS foundation trust is reduced because of a reduction in its services or the closure of a facility, is it the Minister's intention that a corresponding reduction in the amount of private charges be forced on that NHS foundation trust regardless of whether it continued to provide that service?

John Hutton: The answer to that question is clearly contained in clause 15. We have tried to construct the patient cap.

Andrew Lansley: So, the answer is yes?

John Hutton: Yes.
 Amendment No. 195, tabled by the right hon. Member for North-West Hampshire (Sir George Young), seeks to extend the cap to 25 per cent. of turnover. That is a very high figure. It would allow NHS foundation trusts to do a significantly higher proportion of private work than they do today. In 2000-01, less than 1 per cent. of all declared revenue for NHS trusts was derived from private patient activity, so his amendment would give a green light to rapid expansion if an NHS foundation trust wanted to expand its private patient activity at the expense of NHS patients. I am not sure if that is entirely what the right hon. Gentleman intends.

George Young: Following the Minister's logic, why do the caps not apply to hospitals that do not become foundation trusts?

John Hutton: We want all NHS acute trusts to become foundation trusts over the next four to five years. The right hon. Gentleman is right—I hope that some of my hon. Friends who have concerns about these issues will reflect on what he has said—in that the income to be generated from private patients for NHS foundation trusts is more restricted than is currently the case for those acute trusts that are not foundation trusts in the wider NHS. Those who have suggested that private patients will gain at the expense of an NHS patient as we go down this road must look at the Bill and study what the right hon. Gentleman has said.
 However, selling private work in this way would distract from the primary focus that NHS foundation trust managers and staff should have on maintaining and improving the quality of services for NHS patients. It may be that the right hon. Gentleman's purpose in moving the amendment is to probe the Government's intentions with regard to our constructing the cap in the way that we have done, but he will make clear his purpose soon. 
 The arguments behind this are set out in the guide to NHS foundation trust status and in speeches and evidence that my right hon. Friend the Secretary of State, for example, has given to the Health Committee. The Committee may have a rerun of those arguments later this morning; but the purpose and principal objective of NHS foundation trusts is simple: it is to preserve the focus on improving NHS services to NHS patients.

Andrew Murrison: I have listened with some interest to what the Minister has said. He displays a huge lack of imagination and ambition for many of the organisations that he wishes to turn into foundation trusts. Will he reflect upon the fact that private work does not necessarily mean private patients? It also covers private services such as occupational health services. Those were obviously left out of the deliberations of the late 1940s—for which industry in this country has suffered ever since.
 Some parts of the NHS are showing early signs that they would like to put that right on a contractual basis, by providing occupational health services for firms, for 
 example. That could well increase the proportion of their turnover that comes from private work. I wonder whether the Minister might like to reflect on that.

John Hutton: I would not want the clause to be interpreted in the way that the hon. Gentleman has suggested, as it relates to occupational health services. I would regard that as covered by the income generation activities in which the Bill authorises NHS foundation trusts to take part.

Andrew Murrison: My confusion would be eliminated were there a closer definition of private work.

John Hutton: That brings us to amendments Nos. 414 and 415, which were tabled by the hon. Member for Cheadle (Mrs. Calton). We have a simple choice in this part of the Bill between the list-based approach—under which particular activities are identified as being in or outside the cap—and the approach that we have taken, which is to create a general capping power in relation to income that is derived from the treatment of private patients, and to give the regulator the job of deciding, on a case-by-case basis where necessary, whether the activity comes within the cap or not. Generally, my experience as a Minister of trying to legislate is that it is better to do so in the latter way, rather than the former.
 Sadly, the hon. Member for South-West Devon (Mr. Streeter) is not with us, but he always refers to the litigious lawyer. That is probably a bit of an oxymoron, but the point is that a list-based approach, whereby things are identified in a schedule or whatever, tends to light the blue touch paper for the worst-case scenario, which we want to avoid, of endless arguments about whether something is in the list. There is a difficulty, and I accept that there is no easy way to resolve these issues in drafting legislation, but the proposal would take us in the wrong direction, because it would be bound to provoke more argument than the approach that we have taken. 
 I assume that amendments Nos. 414 and 415 are intended to ensure that foundation trust income from private patient activity that is carried out by a subsidiary or joint venture is captured by the private patient cap. I certainly sympathise with the spirit of the amendments and I can understand that the hon. Member for Cheadle wants to ensure that there are no loopholes in the legislation that allow NHS foundation trusts to circumvent the private patient cap. I, too, believe that the cap should not be circumvented, but the amendments are unnecessary. The intention of the legislation is clear on this point. Clause 15(2) refers simply to NHS foundation trust income ''derived''—that is the crucial word—''from private charges''. It does not specify whether the activity is carried out by the NHS foundation trust or another body, such as a subsidiary. 
 We shall come later to the power in clause 17(5) for NHS foundation trusts to set up subsidiaries or engage in joint ventures, which clearly relates to the power to 
 invest. An investment is, of course, undertaken with a view to making a monetary return. Any such return from investments will be counted in the total income of the trust. It will therefore be included, I believe, in the private patient cap as defined in clause 15(2). Therefore, NHS foundation trust income from private patient activity in relation to joint ventures and subsidiaries is, I believe, already covered by the cap. 
 It would be reasonable to expect the regulator also to impose restrictions on the leasing of facilities to other organisations for the provision of services to private patients under the terms of the authorisation. That would be consistent with the spirit of clause 15, but he would also have to ensure that NHS foundation trust activities and income were consistent with their primary purpose of providing NHS services. The NHS foundation trust could not act in a way that undermined its ability to provide NHS services, for example, by leasing facilities to a private provider if that resulted in competition for a limited pool of local staff. That would not be acceptable. For the same reasons that I gave in relation to income from joint ventures and subsidiaries, the issue that the hon. Lady raises in amendment No. 415 would equally be covered.

Andrew Lansley: Is it the Minister's view that the nature of the requirement to provide services for NHS purposes is sufficiently structured in the Bill so that it would not be possible for an NHS foundation trust to use its capacity for private patients at the same time as that capacity continued to be required for NHS purposes?

John Hutton: I am not entirely sure that I understand the question. I am not sure whether the hon. Gentleman is asking about the definition of the private income cap, or whether he is raising a wider question about the co-use of NHS facilities shared between private and NHS patients.

Andrew Lansley: If I was unclear, let me explain. I was referring specifically to the point that I thought the Minister was making, which is that there is both a cap on private income and a general requirement for NHS foundation trusts to have the principal purpose of providing services for the NHS. My question is whether the duty on the foundation trust to provide services for the NHS is sufficiently tight and that, if it requires that capacity for NHS purposes, it cannot be provided to private patients. That is precisely the point that the Minister was making—that there should be no competition between private and NHS provisions, and that a foundation trust will always meet NHS needs before it offers capacity unused by the NHS to private patients.

John Hutton: Yes, that would be my view, and I am sure that the Bill will provide precisely for that.
 Amendment No. 262 was tabled by my hon. Friend the Member for Ealing, North (Mr. Pound). The Bill effectively provides for the concern that he raised. I refer him to paragraphs 20 and 21 of schedule 1, which provide for the independent regulator, with the approval of the Treasury, to determine the form of the 
 accounts of NHS foundation trusts. The accounts will include information that the regulator requires to monitor compliance with the terms of authorisation and statute. That will clearly include information on income from private patients, so that the regulator can monitor the cap under clause 15, and information on investments to monitor compliance with new section (2A) proposed in amendment No. 252. I have every sympathy with the point that my hon. Friend makes, but his points are addressed elsewhere in the Bill. The objective that he and I share is already secured.

Chris Grayling: This is a gargantuan collection of amendments, but at their heart lies an important point of principle. I shall touch on one or two points made in specific amendments, but also talk about the principle, which is encompassed most specifically in amendment No. 8. The spirit of that amendment is reflected in amendment No. 195, tabled by my right hon. Friend the Member for North-West Hampshire. They relate to the ability of foundations hospitals to operate in partnership with the private sector, which we believe is being unnecessarily and damagingly curtailed by clause 15.
 In amendment No. 252, the Government are beginning to acknowledge that the Bill is too restrictive. It allows some degree of extra flexibility to trusts over and above that originally offered and, to that small degree, it is to be welcomed. However, it does not go nearly far enough. 
 Amendment No. 253, tabled by the Minister, my hon. Friends the Members for West Chelmsford and for Chesham and Amersham (Mrs. Gillan) and I, shows a rare meeting of minds. It is a delight to find both sides proposing the same amendment. It would be churlish of me to point out that we tabled it first, but the Minister clearly takes precedence, and I am sure that we will support him. 
 Amendment No. 7 is probing. Clause 15(1) states: 
 ''An authorisation must restrict the provision, for purposes other than those of the health service in England, of goods and services by an NHS foundation trust which was an NHS trust.'' 
The amendment would leave out the words 
''which was an NHS trust.'' 
We want to establish the purpose of treating differently those organisations that apply to become NHS foundation trusts from within the NHS and those—whether private or voluntary organisations, or collections of individuals—that use the provisions of clause 5 to come from outside the NHS, who choose the other path to becoming an NHS foundation trust. Clause 15(1) appears to treat those two categories of applicant differently. I should be grateful if the Minister could explain why that is the case and how those two categories of trust applicants might be treated under this subsection. 
 Amendment No. 254 is a welcome, watering-down of the clause. The Minister has touched on amendment No. 266. I disagree with the hon. Member for Cheadle about this amendment. We believe that it would severely limit an NHS trust's ability to form joint ventures and would worsen its potential to improve patient care instead of enhancing it. The amendment would take us in the direction of the limits that the Bill 
 places on a hospital's ability to work with the private sector. The Minister has not thought the measure through to the extent that he should have done, and I hope that he will go back to the drawing board on it. 
 The clause is an example of politics interfering with sensible practice; it is raw meat to Government Back Benchers. It is not about good patient care or the freedom and opportunity to enhance the quality of service offered in the NHS. It is purely an attempt to send a message to the Labour left that the Bill will not tread on territory if that will make it uncomfortable. To that extent it is reprehensible. 
 Our amendment is not about allowing foundation hospitals to go private; it is about protecting the partnerships that can and do exist between the public sector and the private sector to deliver high-quality health care. In my view that objective can be significantly damaged, and certainly will be curtailed for future generations, by the Bill. 
 An active partnership already exists between the private sector and the public sector in a variety of ways. One of the most evocative relates to the issue of pay beds in the health service. Many of the 236 NHS hospitals that work with the private sector offer private wards and private pay beds, which I know evokes strong arguments across the political spectrum. However, amendment No. 8 is not about pay beds in pay wards. It is about the equipment that the NHS needs in the future to deliver first-rate, high-quality care to its patients. 
 The latest technology costs a great deal of money. It costs hundreds of thousands or millions of pounds to buy the latest equipment to diagnose and treat our patients. Many NHS trusts have already chosen to finance the acquisition of equipment in partnership with the private sector or by selling it some of the equipment's capacity. Without that, NHS patients could not have access to high-quality scanners and other pieces of equipment. 
 To give some examples, Basildon and Thurrock General Hospitals NHS trust has an MRI scanner used out of hours by private health bodies such as BUPA, and its services are often paid for by private medical insurers. That scanner is affordable because it brings in revenues for the hospital that defray part of its cost. University Hospital Birmingham NHS trust has MRI and CT scanners, as well as radiotherapy services, which are all frequently used by the private sector. Its private health care services department says that the money is significant in paying for and maintaining the equipment. 
 The Worthing and Southlands Hospitals NHS trust has MRI and CT scanners used by private patients. Kingston Hospital NHS trust is due to purchase an MRI scanner in June, to which private patients will have access. It says that co-operation with the private sector is important. Interestingly, Southampton University Hospitals NHS trust says that private patient use of in-patient services contributed £2.5 million to the trust last year—money that can be spent on patient care. 
 So what is the consequence of the cap? Let us remember that we are dealing with a measure that states: 
 ''The duty is to be exercised, in particular, with a view to securing that the proportion of the total income of the NHS foundation trust in any financial year derived from private charges is not greater than the proportion of the total income of the NHS trust derived from such charges in the base financial year.'' 
So what happens in the case of an NHS trust that, today, does not have a private business, or has an extremely small private business, and which then decides that the only way to invest in a new, state-of-the-art MRI scanner is to do exactly what those hospitals that I have just listed chose to do: invest the money and pay the bill by bringing in funds from the private sector? A trust that has no income from the private sector today cannot do that because its proportion is zero. Under the Bill, it is not allowed to do the things that many other trusts around the country are doing.

John Hutton: I genuinely think that the hon. Gentleman has misunderstood the Bill. If the trust that he cited as an example wants to treat more private patients to raise more income, it can do that; it just needs to treat more NHS patients at the same time.

Chris Grayling: The Minister totally misses the point. Subsection (3) refers to the base financial year as being
''the financial year ending with 31st March 2003'' 
 ''the first financial year throughout which the body corporate was an NHS trust''. 
Basically, ''base financial year'' refers to what is happening today. So, if a trust does not derive any income today from the private sector, that proportion is zero. If it buys a scanner and goes up to 1 per cent., it is breaking the law. Surely that is not what the Minister intends to happen by placing the cap on the trusts. 
 We could have a long debate about the political perspective on the two sides, what we want foundation hospitals to be able to do and the appropriate balance between private and public sector work. None of us wants our best hospitals to leave the NHS and become private hospitals available only to those who can pay. That is not the aspiration of the Opposition. However, neither do we want a measure that curtails the ability of NHS hospitals to innovate, develop and diversify in a way that enables them to offer better services to all their patients. That is what the measure would permit. 
 I have another example of how the measure might work. Let us consider a trust that is looking to expand. We will come on to clause 17(5), which relates to the ability of an NHS foundation trust to make an investment. Let us imagine a situation in which that same trust, with little or no income from the private sector, subcontracts some of its patient work to a local private clinic. We know that that happens. Where there are problematic waiting lists, the Government are encouraging the NHS to consider alternative 
 solutions if they are available. The NHS foundation trust could be subcontracting to a privately-owned service in a specific area. I know that that happens, because in my constituency the old cottage hospital in Epsom, which is an excellent local facility that is owned and managed by a group of local GPs, effectively provides a private service to the local NHS to carry out some of its cataract operations. It is not simply a question of a big private company. Imagine that in a situation involving a clinic of that kind, the parent company went into administration and in order to secure the continuation of that treatment the foundation trust chose to use the powers in clause 17(5) to buy that clinic from the administrator, but it could afford to do so only if it continued to operate the private business that was coming from that clinic as well as the work that was being done for its patients. That decision is taken entirely in the interests of its patients and so it does not lose an important local health care facility. It is only affordable if the trust carries on managing both parts of the business. 
 That is how I understood the motivation for clause 17 and the kind of investment that a local trust might make. If the foundation trust started with a very low base or even a zero base for its private business, the addition of the cap in subsection (2) might prevent that investment from taking place in the first place. I am sure that it is not the Government's intention. 
 May I ask the Minister to go away and look at this clause again? The Opposition cannot support such a draconian limitation on the freedoms of trusts, which will curtail their ability to deliver quality health care. Foundation hospitals should be centres of innovation that can step outside the tramlines in order to increase and improve services to their patients. Clause 15 is a mistake and I hope that the Government will reconsider the practical consequences of what is set out in subsection (2).

George Young: I should like to speak briefly to amendment No. 195, which amends clause 15. The amendments to clause 15 have been grouped with those to clause 14. I do not understand clause 15. On Second Reading the Secretary of State said:
 ''The Bill frees NHS foundation trusts from powers of direction from Whitehall that have been in place for umpteen years.''—[Official Report, 7 May 2003; Vol. 404, c. 710.] 
Yet under the Bill he is introducing a new restriction. Against a background of freedom for foundation trusts we have this wholly illogical clause 15, which applies only to foundation trusts not to the rest of the NHS. I suspect that it was put in at a relatively late stage as a sop to those in the Labour party who were concerned about the direction of health policy. 
 There is an element of groundhog day about this debate and the amendment. The first time that I sat on a health Bill Committee was in 1975. Sitting where the Minister is now sitting was a good-looking, intelligent Labour Minister of Health who went on to become Foreign Secretary, namely David Owen. We were dealing with legislation on pay beds. I happened to pick up David Owen's ''Time to Declare'' on my way to the Committee this morning, in which he says: 
 ''The pay-bed dispute today is just a vignette of history, a symbol of how very different attitudes were in the 1970s from the 1990s. But then we were in the last throes of the corporatist state.'' 
 Rather revealingly, after it was all over, he said what he thought: 
 ''When Labour lost the election, the Conservatives repealed our legislation and the whole exercise proved to be fruitless. I, who had supported the phasing out of pay-beds, learnt a valuable lesson, namely that reforms have to have a reasonable chance of taking root for it to be worth embarking on legislation in the first place.'' 
I do not suggest that the Minister should read all 822 pages of that book, but he might just look at the section on pay beds and read what happened to previous attempts by his party to introduce restrictions through legislation on the independent sector of medicine. 
 My amendment is a bridge-building amendment. I agree with what my hon. Friend the Member for Epsom and Ewell (Chris Grayling) just said. I do not see the logic of having the clause. If there has to be a cap, the one I propose of 25 per cent. or the current level, whichever is higher, seems more sensible than the Minister's proposal, which was devastatingly exposed by my hon. Friend. The NHS is a dynamic organisation and services that are currently provided on one campus may move to another campus in the interests of rationalisation, improving the quality of patient care and all the rest. 
 If, for the sake of argument, a set of services provided from Basingstoke hospital were relocated to Frimley Park hospital, the total income from the NHS at Basingstoke would fall and as a consequence its income from the private sector would also have to fall. That seems wholly illogical. If the Minister is minded to go down that path, I suggest that he looks at some exemptions to get round the problems mentioned by my hon. Friend. If he does not, I can see the NHS using its ingenuity to get round the problem by relocating services from hospitals designed to be foundation trusts to hospitals that are not, in order to establish a higher plateau before they become foundation trusts. The Minister is frowning, but I should be surprised if there were not some discussions going on with a view to that consequence.

John Hutton: The baseline activity is set out by the Bill, so the sort of gaming that he has described may not be possible.

George Young: Subsection (3) states that the base financial year is
''the first financial year throughout which the body corporate was an NHS trust''.

John Hutton: That is clause 15(3).

George Young: I accept that point, but in relation to those trusts that are not planning to be foundation trusts, will the Minister confirm that if a hospital does not become a trust until 2008, its baseline for those purposes is 2003?

John Hutton: That is exactly the case.

George Young: In which case, the legislation is much more draconian than a lot of people realise. For the first time under this Labour Government, there is
 a cap on the role of the independent sector in the NHS. That is a strong political move for the Government to make. The Minister is frowning, but he confirmed in an earlier intervention that there is no such cap at the moment on NHS trusts. Is that the case?

John Hutton: The right hon. Gentleman knows that that is the case because I have already confirmed it. In relation to his wider point about our willingness to use the independent sector to deal with capacity shortages in the NHS, he will know that we are significantly increasing the volume of activity that we have commissioned from the independent sector. His hon. Friend the Member for Epsom and Ewell referred to the new diagnostic and treatment sectors as an example of where we want to expand its role.

George Young: Which, if I may say so, is why clause 15 is so illogical. Against the background of everything the Government have done until now to promote partnership between the two sectors, to introduce unilaterally a cap that is retrospective in part goes clearly against some of the more sensible things the Government have done since 1997. It is worth remembering that some 3.5 million trade union members have some form of private health cover. With a working population of 27 million, some 13 million make a regular contribution to their own health care or that of their families. To adopt such a stance towards the independent sector of medicine is a move that the Government will come to regret.
 When he speaks later, perhaps the Minister can confirm the following. The Prime Minister has set a benchmark of the percentage of GDP that he hopes the country will spend on health care. Will the Minister confirm that that percentage includes private expenditure as well as NHS expenditure? Therefore, it will assist the Prime Minister in his ambitions to reach the EU average if there is an expansion in the independent sector of medicine. In clause 15, he is trying to impose a rather arbitrary cap on that sector. 
 What my hon. Friend the Member for Epsom and Ewell said was right. I do not think that there has been a problem concerning the role of the independent sector in NHS hospitals during the last five or six years. If there has been a problem, the Government have kept very quiet about it. If there has not been a problem until now, and the Minister wants to enable and give greater freedom to NHS trusts, I am not quite clear why he wants to bring the cap in. Clause 15 sits uneasily with the rest of the Bill, and I endorse what my hon. Friend said in urging the Government to have second thoughts about it.

Patsy Calton: In tabling amendments Nos. 266, 414 and 415, I seek reassurances from the Minister about amendments Nos. 253 and 254. If we look at the change that the Government seek to make by removing ''must'' and inserting ''may'' in clause 15, the effect will be to give the regulator some scope and room to manoeuvre in
 producing authorisation. That is listed under private health care. Under Government amendment No. 254, the duty becomes a power.
 My understanding is that the regulator must exercise a ''duty'', but that once it becomes a ''power'' the regulator may choose not to exercise it. I would be grateful for the Minister's clarification on that matter. Taken together, these could negate all of clause 15 and the restrictions that the Minister seeks to place on the ability of foundation trusts to bring in private health care and, indeed, to increase the amount of private health care to a point at which the foundation trust would no longer be an NHS hospital. 
 The intention of amendment No. 266, tabled by the Liberal Democrats, is to ensure that clinicians can prevent private patients from queue-jumping in NHS hospitals. Again, I look to the Minister to give some assurance that, as clause 15 stands, queue-jumping will not occur. 
 Amendment No. 414, which is a drafting amendment, amendment No. 415, and amendment No. 262 in the name of the hon. Member for Ealing, North, seek to ensure that all income derived from private medicine, on or outside the site or premises of a foundation trust hospital, should be taken into account—if, indeed, the cap truly exists. I should like the Minister to give guidance on Government amendments No. 253 and No. 254 so that I may be absolutely certain that clause 15 does, in fact, provide a cap on private medicine within foundation trust hospitals. 
 Other points have been extensively made by other hon. Members, and I do not particularly wish to discuss any of the amendments tabled by the hon. Member for Epsom and Ewell.

Stephen Pound: I freely acknowledge that there is an element of political difference between Members of this Committee and this country. I do not propose to rehash all the arguments over the existence of pay beds within the NHS. The right hon. Member for North-West Hampshire mentioned groundhog day; if he were to read Hansard from 1947 to 1948, he would see exactly the same arguments.
 That there is an element of pay beds within the NHS, and all that flows from that, is now accepted. The amendments in my name attempt to redress the difficulty of transparency within the financial system—the audit trail. About four years after the NHS and I were born, in July 1948, the Guillebaud report, one of the first in-depth analyses of the effectiveness of the NHS, found it utterly impossible to identify expenditure on joint-site operations. 
 In my experience of working in the Middlesex hospital, to which I have already referred at tedious length and will doubtless continue to refer over the next few weeks, it was utterly impossible to separate by any form of audit trail the true costs of the private patients' wing at one end of the hospital from those of the NHS hospital which occupied the majority of the 
 site. As a porter, I cleared out rubbish from both wings, but was paid by the NHS; I changed oxygen cylinders on both wings, but was paid by the NHS. 
 I am not asking for a recasting of the political basis or ethical standpoint of the entire NHS. I simply want to bring some transparency and honesty into the process. In that, I was greatly reassured by the comments of my right hon. Friend the Minister. Of my right hon. Friend the Minister and the noble Lord Owen, I know whom I would prefer to see standing over me in the operating theatre with a knife in their hand. [Hon. Members: ''Who?''] That would be a tempting prospect, no doubt. 
 Much that is good in the Bill—there is some good—is to do with improved methodologies in actuarial terms and in diagnostics, and with improved transparency in the service. I ask only that we extend that transparency a little further. We should, perhaps for the first time since July 1948, be completely open and honest about the cost of private practice in the NHS. The hon. Member for Epsom and Ewell paints a wonderful picture of a quaint, sylvan cottage hospital on the southern suburbs of London, in which the staff happily co-exist and treat each other's patients. If I may be presumptuous, Mr. Griffiths, you and I know that, in reality, a clipboard is tied with a piece of string to the end of the MRI scanner, and the staff tick it. That is not true partnership or sharing of facilities.

George Young: I am following the hon. Gentleman's argument with great care. Is it not the case that staff currently do not have to tick a box, because there is no restriction on the percentage of income from the private sector, but that under the Minister's regime they will have to tick a box that they do not tick at present?

Stephen Pound: That is a powerful case for my amendment. There are internal audit trails in the NHS for private care within NHS facilities and for shared pieces of equipment, be they the CAT scanners of my time or the MRI scanners of today.
 We need to have a methodology that clearly and transparently identifies that joint usage—not for any party-political purpose, but so that future needs, based on the usage of this very expensive equipment, can be identified. We need to be absolutely sure that we are getting the maximum benefit from the equipment. Transparency will, ultimately, reassure those of us who do not want to see creeping privatisation in the NHS, and it will show that such privatisation is not the purpose of the Bill. 
 My right hon. Friend the Minister's comments reassure me. If he confirms his earlier reference to the Treasury rules contained later in the Bill, I will not press the amendments.

Andrew Lansley: I do not propose to follow the structure of the argument advanced by the hon. Member for Ealing, North; rather, I will follow what my right hon. Friend the Member for North-West Hampshire has said. Rather than dispense with clause 15, the Government might care to think about a different
 structure for the limitations on private charging inside NHS foundation trusts. My interventions, which the Minister kindly gave way to, point in that direction.
 I am becoming confused about pay beds. As I understand it, Government amendment No. 255 was designed to allow pay beds to operate in NHS foundation trusts, much as they do now. Therefore the argument is not really about pay beds. I will give a practical example. At the Rosie maternity hospital at Addenbrooke's, there are several wards, with six single rooms in each. At any one time, the NHS may require between none and six of those for clinical purposes. If not, those beds are available to paying patients. 
 However, as I understand it—the Minister will correct me if I am wrong—Government amendment No. 255 is designed to allow that practice to continue, and those charges will not be counted as the private charging of that NHS foundation trust for this purpose. Equally, I presume that if an NHS foundation trust were to provide an enhanced hotel service, as it were—an in-house, increased-quality catering service—that too would be ancillary to the goods and services that the NHS provides and would, therefore, not be counted as private charging. Therefore, the issue is really about the balance of the use of clinical capacity in the NHS for private patients who would not—and do not—receive that treatment under the NHS. 
 There are significant inflexibilities in the current system, and, in time, there will be perversities. My right hon. Friend referred to my intervention about the perverse effects—an aspect that, surprisingly, the Minister seemed happy to confirm. He gave a practical example of such effects. 
 Another possibility is that facilities or diagnostics for pathology laboratories and forensic services could be transferred between hospitals. Indeed, Addenbrooke's has operated such a scheme for some time. In future, if Addenbrooke's provides local private hospitals with a pathology service, the charges will be transferred between NHS foundation trusts. As a consequence, to live within the cap on local private charging, Addenbrooke's might have to give up some of the other private charges that form part of its financial structure—unless, as the Minister said, it increases its charges on the NHS side as well. 
 As time goes on, the perversity of this inflexible relationship will be exposed. It will be exposed in other ways as well. I emphasise that I do not claim to have originated this argument. In fact, as one or two Members may recall, the hon. Member for South Swindon (Ms Drown) raised the point during the debate that she initiated on foundation hospitals in Westminster Hall on 7 January 2003. We can state openly in this Committee that the hon. Lady knows a thing or two. I shall flatter her in her absence. It is a pity that she is not a member of the Committee, because she would have a thing or two to say—[Interruption.]

Simon Burns: She would be a rebel.
 Mr. Lansley: She might prove to be a rebel, but one who knows a thing or two about the way in which the finances of NHS trusts work. She saw it as perverse that if there were substantial changes in NHS trust income, the cap would force down private charging at the same moment when NHS trusts might be losing capacity or failing to attract NHS commissions.
 That is all very well, but the current system is designed around such chronic shortages in capacity that no one can ever think of such a set of circumstances without realising that more commissioning must take place and more capacity is required. In due course, we may arrive at a situation—as we have in the past, even under the present system—in which commissioners move away from particular NHS providers. Under those circumstances this system will not allow those providers to go to the private sector to fill unused NHS capacity. 
 Furthermore, that will lead to distortion. As an illustration, if an NHS foundation trust was to contemplate the purchase of a new MRI scanner, how could it do so on a joint venture basis? How will such joint venture purchases be achieved in the future? Would the current method, of holding scanners in NHS foundation trusts and allowing patients from private hospitals to use them for a fee, work? My hon. Friend the Member for Epsom and Ewell illustrated that scenario. It would not be done that way. 
 Under the new system, a joint venture arrangement would provide a scanner at a neighbouring private hospital. For example, a scanner might be based in the Nuffield hospital, and NHS patients from Addenbrooke's might be referred to it at a reduced price. The same effect is achieved, but the NHS foundation trust does not have to bear the consequences of a private income cap. It is obvious how distortions might happen. 
 Another possibility is that a private hospital could consider co-locating with an NHS foundation trust. As things stand, the private hospital might do so on the basis that the land assets will remain in the ownership of the NHS foundation trust. The NHS foundation trust might secure a long-term benefit through substantial rent, but will that rent be treated as private income? Would that force NHS trusts to sell their land assets? Members know from other debates that given that that land would not be considered as land required for NHS purposes, it is likely that such land assets would not be treated as the protected assets of the NHS foundation trust. 
 The perversity of the system is that this measure forces NHS foundation trusts to behave in a way that may not be to their maximum financial advantage. Therefore, there are some transparent difficulties with the private income cap that the Government have structured. 
 The Minister helpfully confirmed that, as far as he is concerned, the matter is straightforward—the duty laid upon the NHS foundation trusts is robust. They cannot provide clinical capacity to private patients in circumstances in which NHS commissioners require that capacity for NHS purposes. If I take the Minister 
 at his word—I assume that he is right—why is the private income cap needed? Surely it follows logically that NHS foundation trust capacity that is offered to private patients is not required by the NHS. The capacity may vary from year to year, but the offering of it and the increase in private patient income that might accrue from its uptake would not have any negative consequences for the provision of NHS capacity as, if it were priced properly, that income would contribute to the overhead costs of the provision of that capacity. 
 I do not understand why the Minister needs the private income cap. He needs it only for the perverse effect of restricting the ability of NHS foundation trusts, in the long run, to offer unused capacity to private patients. It is not needed to engage in private competition, as he told us that the NHS foundation trusts would not be allowed to engage in competition, as it were, between the NHS commissioners and private commissioners. 
 Why does the Minister not do away with that provision and, if necessary, write a more explicit provision into the legislation—that NHS capacity must not be used for private patient purposes other than in circumstances in which NHS commissioners have no desire to use that capacity at that time. That is straightforward and could be part of the authorisation. Under those circumstances, why have the cap at all?

Andrew Murrison: I have said before that I consider the Minister's aspirations for the NHS, as outlined in this part, to be rather poor. They fail to take into account future developments in the NHS. I listened closely to the arguments of my right hon. and hon. Friends about the possibility of NHS services in a particular area contracting and the legal implications for the private health facilities that those hospitals provide.
 That recalls the experiences of the 1950s. I was not alive then, but in the 1980s I was at medical school when I met some consultant physicians who had had to retrain in the 1950s following the closure of a large number of respiratory wards. At that time TB was being brought under control, and there was no need for the number of respiratory physicians that had been required in the early parts of the last century. 
 Great areas of our health care system have changed in recent years. Respiratory medicine, in particular, used to employ a vast number of health care workers, but has now contracted substantially. NHS provision is dynamic, and rightly so, and my concern is that, in this set of amendments, Ministers are putting a stricture on the NHS that will not take account of future change. As we gripped TB in the 1950s, so I hope we will grip other areas of ill health in the future, such as cancer. This week we heard of an upsetting upsurge in the incidence of breast cancer, for example. Cancer may not be such a problem for us in the future when such areas of our health care are more than likely to shrink. 
 Under those circumstances, the type of provisions that Ministers have laid out in the Bill will kick in with a vengeance because paradoxically it will mean that we will have to close other parts of our health care system. We must recognise that many doctors in particular work in both sectors. In fact, the majority of doctors do so; there are relatively few who work specifically in the private sector. The majority work predominantly in the NHS. Having to cut back on the private sector may well reduce the number of specialists—

Andy Burnham: The hon. Gentleman has just used the words ''having to cut back on the private sector.'' If he reads the Bill, he will see that it contains no such proposal. The Bill states that the proportion of income from private work cannot be greater than the proportion of total income from NHS work. If overall work increases, the amount from the private sector can increase. The hon. Gentleman and his colleagues have been confused about that in their remarks.

Andrew Murrison: The hon. Gentleman has misunderstood my remarks. I went to some pains to describe the example of TB sanatoriums. That is only one example. Its purpose was to explain how, on a trust-by-trust basis, the contraction in a particular service as it reconfigures may well lead to a reduction in the amount of private health care that that trust is able to provide. That would not work across the service overall, but specifically in foundation hospitals. Because a relatively small number of specialists work in each defined specialty, the viability of some consultant posts may be reduced.

Andy Burnham: To clarify, my understanding is that the purpose of this clause is not to necessarily restrict or cut back on private sector work, but to ensure that the balance of work carried out by NHS trusts is not significantly altered as a result of NHS foundation status. That seems an entirely proper provision to put in the Bill when we are going forward with a publicly funded NHS.

Andrew Murrison: I have no doubt that Ministers do not intend to cut back on any part of health care. What my right hon. and hon. Friends and I are trying to point out is that, paradoxically, that might be an effect of the Bill as drafted. The Prime Minister recently stated his aspiration to bring spending in our health service up to the EU average within five years. That will be woefully short of target if one takes that as the EU spend that will apply in five years. Even with the largesse heaped upon the NHS recently—which is very welcome—we must admit that it will fall a long way short of the average EU spend that will apply in five years as opposed to that of a few months ago—the figure used as a baseline when the Prime Minister made that statement.
 Health care in this country is defined by the vestigial nature of its private sector. I regret that the Bill will potentially reduce the amount of money that comes into health services, broadly defined, and to that extent it will do our constituents a great disservice. 
 Mr. Hutton: I should like to respond briefly to some of the points that have been raised in this interesting debate. The right hon. Member for North-West Hampshire, in his characteristically articulate and fluent style, described this as something of a groundhog day debate. It certainly is. There has been a sense of deja vu about all the debates that we have had on foundation trusts, right from the beginning of the Bill's Committee Stage. The problem with a groundhog day is that it starts at 6 o'clock in the morning. My day certainly started at 6 o'clock, although I did not have the benefit of listening to ''I Got You Babe'' by Sonny and Cher, which would have cheered me up enormously.
 One important aspect of this debate is that it has highlighted not just an ideological difference between the Opposition and those of us on the Government Benches, but a paucity of concern from the Opposition about how these issues should be addressed. 
 The hon. Member for Westbury (Dr. Murrison) said that the clause would reduce the amount of income available from private sources for the NHS. However, that is not a proper and fair reading of the Bill. If he is concerned about the need for a safeguard, what is his proposal? His Front-Bench spokesman proposes no safeguards whatever.

Andrew Murrison: The Bill has given the independent regulator a remarkably broad remit, except in one area—the provision of private health care. Given that overarching remit, surely the independent regulator can be trusted to ensure a proper balance.

John Hutton: Yes, but the regulator should have a peg on which to exercise that concern. The problem with the amendment that I presume he supports is that it kicks any opportunity to impose such a restriction from under the feet of the regulator. The basic argument is one of ideology, and it will probably be impossible to breach.
 The hon. Gentleman, and to a lesser extent the right hon. Member for North-West Hampshire, accepted in principle the need for some cap—although his may not be a cap at all. The argument is essentially one of principle. My hon. Friend the Member for Leigh (Mr. Burnham) made the point perfectly. In fact, I wish that I had used his words in my introduction about the need for clause 15. It provides an essential balance and a safeguard. The prescription offered by the Opposition Front Bench spokesman is that there should be no such safeguard.

George Young: How does the Minister survive for six years without any safeguard?

John Hutton: I come to that point, because the right hon. Gentleman and his hon. Friends have not appreciated that nothing like clause 15 applies to NHS acute trusts. However, NHS trusts are subject to the overall powers of direction of the Secretary of State. We are now removing those powers of direction in relation to NHS foundation trusts. We do not want, at the same time, to create a situation that he and others have encouraged us to enter. There must be an essential—
 Dr. Murrison: Will the Minister give way?

John Hutton: I will not give way, because I want to make a point. The NHS is there to advance the interests of NHS patients. Its wider ambition is to have a range of income-generation powers available to support its primary purpose. There must be an essential balance, and I genuinely believe that clause 15 strikes that balance in the right place, in spite of the difficulties alluded to by the hon. Member for South Cambridgeshire (Mr. Lansley).
 I shall come to some technical points that have been raised. I do not wish to mislead the Committee, and I may have done so in my reply about why the cap is needed. However, it is a fundamental point, and I must put it to the Committee that the basic premise is to accept or not accept.

Andy Burnham: Does my right hon. Friend agree that the root cause of the objections from the Opposition is that, effectively, a block is put on their much-trumpeted and heralded policy of using public resources to pay and subsidise people to go private?

John Hutton: I agree, but I suspect that we do not want to have a wider debate about the pay-as-you-go health care market that the Opposition now officially espouses.

Chris Grayling: I hope that the hon. Gentleman will address the points that I raised about a hospital with no current business. Does he not accept that the amendments that we have tabled leave in subsection (1) which provides, through the regulator and the authorisation, a means to provide the checks and balances that the Minister has described without creating the absurdities that would be set up if subsections (2), (3) and (4) were implemented, for the reasons that I described?

John Hutton: No, I do not accept that. If I had accepted that, I would not have prepared the Bill in this way. The hon. Gentleman made a point about trusts that have no private patient income. I suspect that this is one of those crunch issues around the architecture that we promote on which it will be impossible for us to reach an agreement because we start from a different place.
 We want to ensure that foundation trusts will exercise their new freedoms first and foremost for the overall benefit of NHS patients. That is what clause 15, along with other provisions in the Bill, is designed to do. It is an essential safeguard to set alongside those new freedoms. In constructing any sort of regime, such as clause 15, there will be issues of a technical nature as raised by the hon. Gentlemen opposite. I agree with my hon. Friend the Member for Leigh that there has been a misunderstanding about what clause 15 is designed to do. 
 The hon. Member for South Cambridgeshire is right about amendment No. 255. We do not want income from that type of source. For example, NHS trusts that provide cable or satellite television, or access to the internet, will not be covered by clause 15; neither should they. Those are important ways in which NHS 
 foundation trusts could add to their income-generation opportunities, while improving services for NHS patients, and we do not want to get in the way of that. 
 If we start from the premise that a safeguard is needed, we must define what one should be. The official Opposition propose that there should be no regime of safeguards at all, which would seriously sell short the interests of NHS patients. We have been around this track before. It is important to recognise, as my hon. Friend the Member for Leigh did, that the provision would not restrict the opportunity to treat patients privately if that was what a foundation trust wanted to do. However, the trust cannot do that at the expense of NHS patients. 
 The hon. Member for South Cambridgeshire raised the issue of spare capacity. It would be possible for spare capacity to be provided for private patients on behalf of NHS foundation trusts, but not if that breached the cap. If a trust wants to provide additional capacity to private patients, it must match that with an increase in capacity and services to NHS patients. If the issue is considered in that sense, one could not present it as an ideological witch hunt against the concept of private patients. We want to strike a balance between NHS patients and private patients, and not have one ruling out the other altogether. That is a common-sense, middle-of-the-road position. 
 I do not agree with the right hon. Member for North-West Hampshire that clause 15(3) is an arbitrary cap. It simply examines the position of NHS trusts as they apply to become foundation trusts in the base financial year. No one could logically describe that as an arbitrary cap. We are not saying that the cap will be set at a lower level than the ratio of balance between private patients and NHS patients. It will be set at the actual level, which will vary from trust to trust. It is not an arbitrary cap; it relates to and reflects the practice of a particular trust in treating NHS patients and private patients. 
 The hon. Member for Epsom and Ewell said that if a trust did no private sector work, it would not be able to do any after it became an NHS foundation trust. That is true. However, I am not aware of any NHS trust that does not have some facilities and services available to treat private patients. Perhaps there is one; I am sure that I will find out shortly whether that is so. Like many of his extreme examples, this is a million miles away from reality.

George Young: To take the example mentioned by my hon. Friend the Member for Epsom and Ewell, if a trust that had no income from the private sector derived some income in the next two years and subsequently became a foundation trust, would that have to stop because the base year is 2003?

John Hutton: Yes. In that scenario, the trust would have to stop, because the base year is set at 2003. That is how the system would operate in that example. All the amendments relate to that issue; the need for—
 Chris Grayling: Will the Minister give way?

John Hutton: I will not give way, because I have made the point perfectly clearly. All the amendments relate to the need for a safeguard and a cap, clarity about the cap and the calculations on which the cap is based. It is a clear and simple proposition. There is no doubt about how it should apply.

Andrew Lansley: Although the Minister keeps repeating that point, he has not answered the question. The burden of my contribution was that there is a safeguard, which is that, through authorisation, the independent regulator could provide that the capacity of an NHS foundation trust should not be used for private patients in circumstances in which any NHS commissioner required that capacity. Why can the Minister not accept that as an adequate safeguard, providing greater flexibility?

John Hutton: The hon. Gentleman's proposals raise interesting technical issues—

Andrew Murrison: So do these.

John Hutton: Certainly. I agree, but the hon. Gentleman's solution is not a perfect one. We are trying to construct a simple, transparent and clear framework in which all trusts that are applying to be foundation trusts will know exactly what the position is with regard to their private practice income. In this case, the benefits of simplicity and clarity are important.
 The hon. Lady for Cheadle was asked whether amendments Nos. 252, 253 and 254 circumvented the need for the cap. They do not. The independent regulator must apply the private patient cap, although he can use his discretion to restrict further services. When coming to a view about authorisation, there is no question but that the regulator has to apply the cap.

Patsy Calton: I accept what the Minister says, but I am unclear about where precisely in the Bill that is said. The words will be there in legislation long after we have all gone, and will be interpreted at face value. We should be absolutely clear about what those words mean.

John Hutton: We are being clear, and I have tried to be clear to the Committee. Amendments Nos. 253 and 254 do not affect clause 15(2), and no one should be confused about the intention.
 The hon. Member for Epsom and Ewell asked why no similar provision is being made for non-NHS trusts applying to be NHS foundation trusts. I made clear why there was no equivalent provision in relation to public benefit corporations coming into NHS foundation trust status under clause 5; simply, there would not be a baseline year of activity on which to base their cap. It would not be possible to apply the provision in the same way to non-NHS organisations that wanted to be NHS foundation trusts. The provision makes perfect sense in that respect. 
 There has been a long debate on clause 15, and I accept and acknowledge the importance of the issues involved. The debate has revealed an interesting 
 division of opinion across the Committee about the need for this type of safeguard. There are different points of view on this. On the Opposition Back Benches, there is an acknowledgment in principle of the need for safeguards of some kind, although they are equally problematic. The right hon. Member for North-West Hampshire's suggestion of a 25 per cent. cap on private income would probably mean a twentyfold increase in the volume of private patient activity that a typical NHS trust might be able to take part in were it to become a foundation trust. That would not be sensible. From the Opposition Front-Benchers, the argument has been that there should be no safeguards whatsoever. 
 This side of the Committee has a choice between accepting the need for some safeguards or for none at all; I believe that there is a need for a safeguard. The safeguards that we have in the Bill are clear, simple and transparent.

Andrew Lansley: The Minster has been gracious in giving way. When he began, he said that there was something on which he may inadvertently have misled me. He seems to be about to conclude, but I have not yet discovered what it was.

John Hutton: That was obviously my intention. I believe that it was the point about spare capacity and whether it could be offered to private patients. The answer is that it could be, provided that it did not breach the patient cap in clause 15(2). If I gave the hon. Member the impression that the spare capacity could not be offered, that was clearly wrong. It may have led him to assume that I did not need clause 15(2). I do not wish to repeat myself. The case for the cap on private patient income is clear, and I take comfort from the interventions that my hon. Friends have made to support the Government's view that such a safeguard is necessary.

Chris Grayling: The Minister has done a good job of reminding me why I sit on the Opposition Benches and why I will do everything that I can to remove this Government from office at the earliest possible contingency. What an absurdity these arguments are. The Government are saying that they will make it illegal for a trust that is seeking to achieve, or has achieved, foundation status to invest in a piece of equipment such as a scanner and to pay for part of the bill through private revenue.
 I have given the Minister examples. The proportion of private income might not be zero; it might be 1 per cent. or 0.5 per cent. Regardless of the figures, in making that investment, a trust that pushed its proportion of private income above its baseline threshold would be breaking the law.

John Hutton: No.

Chris Grayling: The Minister said that a trust that was not on the initial list and invested in a new MRI scanner and then sought to achieve foundation status would have to scrap that scanner if its private income increased from the base year as a result of purchasing that scanner. What an absurdity that is. On that basis,
 I have no compunction about asking my right hon. and hon. Friends to support amendment No. 8. It is an act of monumental stupidity, and one that the Government will live to regret.

Patsy Calton: I would ask the Committee to allow us not to move amendments No. 266, 414 and 415. However, we would like a vote on Government amendments Nos. 253 and 254.
 Amendment agreed to. 
 Amendment made: No. 149, in 
clause 14, page 6, line 23, leave out 'may authorise or' and insert 'must authorise and may'.—[Mr. Hutton.]

Win Griffiths: I do not propose to hold a stand part debate on clause 14 as amended. The Committee has debated the issue for one hour and 40 minutes.

Andrew Lansley: On a point of order, Mr. Griffiths. During the debate, we have not touched on whether the independent regulator would, under clause 14(7)(f), be able to undertake regular reviews as was suggested in the ''Guide to NHS Foundation Trusts.'' If you allowed a debate, I would at least be able to ask the Minister that question. That is the limit of my intention.

Win Griffiths: As I recall, that matter was briefly referred to during debates on clause 14(7). The issue got an airing; very briefly, I admit. I feel that we do not need to go into it in any greater detail.
 Clause 14 (as amended) ordered to stand part of the Bill.

Clause 15 - Private health care

Amendment proposed: No. 253, in 
clause 15, page 7, line 5, leave out 'must' and insert 'may'.—[Mr. Hutton] 
 Question put, That the amendment be made:—
The Committee divided: Ayes 19, Noes 3.

Amendment proposed: No. 8, in 
clause 15, page 7, line 8, leave out subsection (2).—[Chris Grayling.] 
 Question put, That the amendment be made: —
The Committee divided: Ayes 6, Noes 17.

Amendments made: No. 254, in 
clause 15, page 7, line 8, leave out 'duty' and insert 'power'. 
No. 255, in 
clause 15, page 7, line 16, leave out from 'patients' to end of line 17 and insert 
 'other than patients being provided with goods and services for the purposes of the health service'.—[Mr. Hutton.] 
 Clause 15, as amended, ordered to stand part of the Bill.

Clause 16 - Protection of property

Chris Grayling: I beg to move amendment No. 12, in
clause 16, page 7, line 25, at end insert
'but does not include property acquired subsequent to the date of its establishment as an NHS foundation trust.'.

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 14, in 
clause 16, page 7, line 30, leave out 'may' and insert 'shall'. 
Amendment No. 15, in 
clause 16, page 7, line 30, leave out 
 'on any terms he considers appropriate' 
 and insert 
 'unless he believes the disposal of the protected property will render it impossible to deliver a comparable level of service to that provided on the date of the trust's formation.'.

Chris Grayling: The amendments are designed to address specific elements of the provisions that the Government are aiming to put in place for the protection of property. We do not want foundation hospitals to dispose of their core assets. Many are in city centres, and most are in prime locations where
 they have a large real estate value. We do not want trusts to take advantage of that asset base to raise revenue for whatever purpose they choose.
 Equally, we do not want to see them in a straitjacket that would make it impossible for them to modify their asset base to reflect the reconfiguration of services, to change the nature of their asset base or to dispose of any spare property that they do not need. It is their duty to continue to be able to deliver the basic core hospital services. The amendments are designed to address elements of the management of their property portfolio. 
 Amendment No. 12 relates to later acquisitions of land that might be acquired through the rights that will come up in clause 17 to make further investments. The amendment would add 
''but does not include property acquired subsequent to the date of its establishment as an NHS foundation trust.'' 
That allows a trust to modify its investment portfolio. Let us say that a trust acquired a clinic and chose subsequently to dispose of part of the land; perhaps it chose to close that clinic down on a separate site and to move its facilities to its core site. It is then left with an asset that has been providing a core service to the trust. 
 I gave an example earlier of a trust using a cataract clinic that it had acquired; if it had been able to do so under the restrictions we discussed earlier. The trust might subsequently choose to move the cataract service to its own site. Arguably, under the definition of protected property, that cataract clinic would be a protected site, because it is a core part of the service that the trust is using to provide basic health care services to its patients. Our argument is that where the trust subsequently invests in a property and chooses to reconfigure its services, it should have the freedom to dispose of that property if it chooses to do so. 
 I hope that the Minister can either explain that he does not envisage the protection measures applying to property acquired subsequently or say that he is prepared to offer some flexibilities so that when trusts make subsequent investments and acquisitions, those acquisitions are not automatically pulled into the core straitjacket afforded by the provisions under protective property. 
 Amendment No. 14 concerns the power of the regulator. Clause 16(4) states: 
 ''The regulator may give approval under subsection (1) on any terms he considers appropriate.'' 
Imagine a situation in which a trust comes forward with a proposal to the regulator to make a property disposal as part of a reconfiguration of its services. It has met all the criteria for doing so, it is proposing changes in a way that will not affect its core services and it is meeting all the requirements expected of it by the regulator. 
 However, the Bill still only gives the regulator a general sense of the direction his decision must take; it is not an obligation. The regulator ''may'' give approval even if all the criteria have been met. We want to be able to say that if an NHS foundation trust has done its homework, put together a credible proposal for a reconfiguration of services that involves 
 changes to its property portfolio and met all the sensible criteria that it should be expected to meet, the regulator should, at that point, be obliged to accept it. The word ''shall'' should replace the word ''may''. It is simply a matter of finding where the balance of power lies. 
 Our view is that foundation hospitals are about local freedom and not centralised freedom, subject to reasonable safeguards in a number of areas. The balance of decision-making and the balance of power should reside with the trust rather than with the regulator. If a trust does its job properly, the regulator should not be able to turn around and say that he does not want it to go ahead anyway. That is the purpose of amendment No. 14. 
 Amendment No. 15 further addresses the issue of the circumstances of disposal of property. We tabled it because of the nature of our national health service at the moment. If the Government pursue their current strategies, it is inevitable that the NHS will see a significant reconfiguration of services over the next few years. The document ''Keeping the NHS Local—A New Direction of Travel'' sets out a vision of a number of services that are currently carried out in hospitals, and will be carried out in foundation hospitals once they are established, moving into the community. 
 In a number of areas, including mine, primary care trusts are setting out a clear strategy to change purchasing patterns; to buy more services for community hospitals; to devote more resources to the primary care sector and to community hospitals; and to reduce the workload and the capacity problems in major hospitals. In some areas, that is likely to lead to the closure of hospital sites. In my constituency, we are debating the future structure, location and provision of hospital services at Epsom General hospital, St. Helier hospital and a theoretical future third site. 
 We are going into a period in which NHS services will be under major review. Purchasers may ask trusts to reconfigure services, to do less and to allow services to be bought in through community hospitals. We must not place a protective straitjacket around those trusts that would make it difficult for them to respond to the changing requests of their purchasers. That is why we fear the scale of the straitjacket being proposed in clause 16. 
 The purpose of amendment No. 15 is to change the balance of power and to make the regulator a watchdog rather than a decision-maker. The purpose of the amendment is to show that we accept that trusts will make decisions in the next few years that will involve changing their sites, changing the configuration of services on their sites and changing the way in which they work. 
 We must ensure that the foundation hospital status that this Bill would afford those trusts is not abused in a way that would remove assets from the health service that could no longer be used for patients. We must not tie foundation trusts up and create a situation in which they cannot respond to a national strategy, through directions like that in ''Keeping the NHS Local—A New Direction of Travel''. Equally, we must ensure 
 that they can respond to the pressures that will come from primary care trusts to change the way in which they operate.

Evan Harris: The hon. Gentleman is talking a lot of sense on this mater. However, there is a further pressure; not just from primary care trusts and Government policy, but from quality watchdogs. Watchdogs might say that it was no longer safe to provide a certain level of service—such as high-risk maternity services—in a certain building or a certain trust and that those services must be provided in another area. I hope that that does not happen too often, but I hope that it happens when appropriate.
 However, the wording of amendment No. 15 might prevent that quality from being introduced and safeguarded, because of the words ''comparable level of service''. There might be no such service, and the wording of the amendment might tie hands too tightly.

Chris Grayling: The hon. Gentleman has made an interesting point, which I will be happy to consider and which, I hope, Ministers will consider. If the Minister accepts the general direction in which the amendment is trying to take the Bill, we will be perfectly happy to see a different draft that takes into account the circumstances that the hon. Gentleman has described.
 This amendment is not intended to change the protections that the Government have afforded NHS patients through the Bill. It attempts to reflect the practical nature of the job of today's NHS managers. The amendment accepts that foundation trusts will have to evolve and change the services that they offer, and the amendment will ensure that they have the flexibility to do so. 
 The regulator should be there as a watchdog to ensure that, in changing services, managers do not remove from patients the resources, the property, the assets or the means of delivering those services. The amendment gives managers the freedom to make the decisions that they need to make in response to a changing world.

Evan Harris: The amendments address the important tension that exists between wanting both freedom for foundation trusts and a strategic oversight of the best use of property assets in the NHS. I understand the point that the hon. Member for Epsom and Ewell made. He wants to see the maximum amount of freedom with a predisposition—a default situation—wherein foundation trusts are free to make changes to their estates in order to keep pace with their plans, as well as with the modern NHS. All hospitals need to do that.
 The problem is that hospitals are not isolated islands and ought not to be seen as such. They work within a community, and there is some concern about two-tierism. The risk of giving too much freedom to foundation trusts to dispose of property in the context that the Government are setting up is that it will not 
 necessarily be done in the context of the whole NHS. There must be some strategic oversight, which at a regional level must be democratically accountable. 
 Although that debate is for another clause and another day, I should like the Government to specify the criteria that the regulator is expected to use. Obviously, they cannot be prescriptive at this point, but I want reassurance from the Government, when we discuss the amendments, that there will be close co-ordination between the regulator and the strategic health authority—or whatever the Government are likely to change that to in the near future—to ensure that things are done holistically in each area. 
 Being too prescriptive presents a difficulty, because the regulator will be required to be alert to issues that may not appear to be particularly commercial or even that popular with local users, but which may be fundamental issues of quality. The one advantage of the Government's wording is that it is less prescriptive of the regulator in those respects. There is the issue of the transparency of any decision that the regulator makes, but that would be the case whatever the wording. I hope that the Minister will be clear on what consultation the regulator will carry out when making decisions about which properties to designate and which disposals to approve under clause 16(4). 
 The debate is interesting, but the fundamental questions cannot necessarily be dealt with by the amendments tabled. We are still failing to address the question of what forms the basis of strategic planning in a health service in which there are greater freedoms for one than for others and there is no democratically accountable way of controlling how those freedoms are used. I hope that we will have a chance to continue the debate on those wider issues another time.

John Hutton: I agree with the hon. Member for Epsom and Ewell that clause 16 must not create a straitjacket. He is correct that, by definition, the NHS is an organisation that will always be subject to change and reconfiguration. That is so, rightly, because it is a science-based service. Science changes, and therefore the provision of services must change to reflect that. We do not think that we are proposing a formulation in the Bill that will, in his language, create a stranglehold on the ability of NHS foundation trusts to properly manage the property with which they are entrusted on their establishment.
 However, that is the nicest that I can be to the hon. Gentleman about his amendments. He says that he accepts in principle the need for some safeguards because of the importance of those assets. However, his amendment would effectively remove those safeguards for any assets that NHS foundation trusts subsequently acquired. Under his proposals, those could never be designated as protected assets. Therefore, the regulator would not at any time be asked to consider whether to approve the sale or disposal of those assets. The hon. Gentleman cannot argue that there is a need for a safeguard on one hand and then comprehensively ride a coach and horses through the safeguard. 
 I understand the point that there needs to be flexibility in the way in which those assets are used, although I genuinely believe that the Bill will provide that flexibility. However, important safeguards must be built into the legislation so that crucial assets that are fundamental to the delivery of NHS services in a locality cannot simply be asset-stripped in the way that the hon. Gentleman described. We will not allow that to happen, and clause 16 is the mechanism that will ensure that it does not. 
 There is a slight problem with amendments Nos. 14 and 15 in relation to clause 16(4), which relates to whether the regulator can attach conditions to the sale of the protected asset, rather than whether he must approve the sale of the protected asset itself. The amendment tabled by the hon. Member for Epsom and Ewell turns that around and requires the independent regulator to approve the sale, subject to that one condition added in the amendment. That is neither sensible nor useful. 
 The hon. Gentleman has asked the hon. Member for Oxford, West and Abingdon (Dr. Harris) and myself to reflect on the criteria that the independent regulator would be likely to use to come to a view on which assets should be protected. First, the independent regulator will look at clause 14(6) in relation to those services that the NHS trust is, or may be, required to deliver. Clause 16(3) and the general duty under clause 3 must also be considered by the independent regulator to make sure that the NHS foundation trust provides comprehensive health care that is free at the point of use. Through a combination of devices and routes, the criteria to be applied by the independent regulator in deciding whether to dispose of protected assets are already contained in the Bill. 
 I agree with the hon. Member for Epsom and Ewell that there is often a time when protected assets—fundamental assets—must be disposed of; a classic example is when they are being re-provided elsewhere, and we have been given examples of that today. None of us, in our right minds, would want to stop an NHS foundation trust disposing of an asset in that way, because the disposal would facilitate and almost certainly help to finance, through the private finance initiative, the provision of that alternative service. 
 We must be clear that the Bill will not stop those disposals. I understand where the hon. Member for Epsom and Ewell is coming from, but I advise him that the Bill, as currently constructed, is not a straitjacket; nor does it form a stranglehold by NHS foundation trusts on proper asset management. His proposal that any future assets could never be designated as protected would run the risk of accomplishing what he argued we should not do, which is to make sure that proper safeguards are built in to these arrangements. Clause 16 seeks to do that and although I have ended up on a sour note, which I did not intend to do, I could not in a month of Sundays recommend acceptance of the amendment. However, we share common ground that a series of protections must be built into the Bill. Our proposals strike the right balance between freedoms and essential protections. 
 Chris Grayling: I failed to clarify to the Minister the situation that I was attempting to address. One example relates to investment and assets above and beyond the initial asset base of the trust. If the trust wishes to purchase an asset, it might look to secure future investment on that property, and it might need to take on a mortgage to buy that property in the first place. For example, if a trust bought a plot of land and took out a mortgage to buy it, the trust would be borrowing against the security of that site in order to expand its services. However, if that site automatically became a protected site because of the nature of the services carried out on it, it could not have a mortgage.
 That is the kind of constraint that the straitjacket would place upon trusts. I accept and understand that, and I do not want to debate the rights and wrongs of the Government's rationale of saying, ''We set up the foundation trust with an asset base and we want to judge the core assets of that asset base in relation to the provision of a health care service.'' The trust cannot asset-strip. There will be bits of peripheral property that no one would have a problem with the trusts hiving off. However, if a trust decides to invest in the way that I have described, the straitjacket may take effect, and a mortgage may not be taken out, because of the provisions of the Bill.

John Hutton: The hon. Gentleman is right. We do not want protected assets to be the subject of mortgages in the way that he has described. That would drive another coach and horses through the failure regime, which I hope we will discuss later this afternoon. If there is an existing range of financial creditors who have a prior claim on those protected assets, the failure regime that we have constructed will be redundant. We will not allow that to happen either.
 There are several ways around the problem that avoid that restriction. I agree that if that were the only way to raise capital and to finance the new provision of assets, there would be a difficulty. We are providing additional financial resources through the new financing facility, which we discussed early on. Crucially, and most importantly, the borrowing security described by the hon. Gentleman that is most likely to be available will be security on revenue flows, which will be dependent on the volume of activity that the trust generates. 
 There will also be an opportunity to raise capital on the strength of security provided by non-protected assets that the NHS trust might own. It would be unusual for that to be the only route through which the financing of such a new asset would have to take place. We should remember that—as we discussed earlier—the Secretary of State also has the ability to make loans and grants available to foundation trusts. Therefore, there are several ways around that particular problem. 
 The hon. Gentleman is right in one respect; the basic architecture of clause 16—we will come up against this matter in later provisions of the Bill—is to avoid any suggestion that protected assets could be subject to mortgages in the way that he has described. It clearly would not be in the long-term interests of the NHS if such a creditor were able to claim preference or priority over that asset in the event of failure of NHS 
 foundation trusts. That would clearly jeopardise the provision of NHS services. We have always made our priority clear on that.

Chris Grayling: I do not intend to press these amendments to a vote. This is another bit of the jigsaw puzzle of constraints on the freedom of NHS foundation trusts to operate. It is one area of potential development that they will not be allowed to pursue and one element of the straitjacket that might be applied to them across the whole range of their services and the ways they operate, which ultimately reinforces the view that the Bill is all talk and very little substance. That said, I do not intend to press the issue to a division, and I beg to ask leave to withdraw the amendment.
 Amendment, by leave, withdrawn. 
 Question proposed, That the clause stand part of the Bill.

Evan Harris: In order to move things along, I tried earlier to bring up an issue that I now want to raise. However, the Minister omitted to deal with it. I am sure that he has an answer prepared, but he was just keen to press on with some of the direct issues around the amendment.
 The issue is the consultation on some of these matters. The regulator, rightly, must consult with bodies over amendments to authorisation, and the Minister has also put on record the general requirements to consult when authorising an application. I should be grateful if the Minister clarified the requirements for consultation on the designation of property, as there are none in the Bill. 
 I am not so much concerned about locally loved buildings, although that is an important factor. It is not necessarily the role of the regulator to always protect bricks and mortar. However, I am interested in the consultation outside the foundation trust about the best use of that NHS property, even if it is not necessary for the trust to use it for health services. What fate would be best in the context of the local NHS and the regional NHS as a whole? 
 I cannot see that there is any requirement on the regulator to consult, and I am not even sure that this is a particularly transparent process. If foundation trusts and the regulator are not going to run into problems as soon as this starts, it might be best that it be made much clearer both that there will be a transparent process and that local people—other than the public constituency of the trust—and other local stakeholders, such as non-foundation hospitals locally, the strategic health authority and others, will have a say in deciding whether the sale of the asset as proposed is necessary.

John Hutton: I am sorry that I did not respond to that point earlier. We dealt with some of those issues in the consultation process that considered the establishment of NHS foundation trusts. We shall later discuss the application to NHS foundation trusts of the general obligation to consult local communities about any
 substantial change to the pattern of services. In both of those areas, the hon. Gentleman will find an answer to his question about what consultation process would normally be attached to any agreement that the regulator has made to dispose of protected assets in clause 16.
 Those assets are fundamental to the provision of core NHS services, and it would be difficult to imagine any disposal of those assets not triggering the normal requirement to consult with the local community about the provision of NHS services. In reaching his decision to approve or otherwise a disposal of a protected asset, the regulator should have regard to the outcome of that consultation process. There is no specific provision in clause 16 that deals with consultation, but the pathways on which the issues would be addressed are dealt with in other parts of the Bill or in other legislation attached to it.

Evan Harris: I am grateful to the Minister for his explanation. However, he did not address the point that I made, which is not that the regulator must be sure that it is not a core service—I accept that the regulator has a duty to ensure that—but that there may not be a necessary core service for that NHS trust. The best option may be to use that property for another part of the NHS in the local area. That is not the part of the equation that the foundation trusts have to think about; they have to judge whether it is a core service for them. It is not part of the regulator's thinking, because he has to look at it solely in terms of the services provided by the NHS foundation trusts. I should like some reassurance that the needs of the NHS generally will be considered and that the regulator will have regard to that, because the NHS foundation trust may not have regard do likewise.

John Hutton: I can give the hon. Gentleman that assurance, because that takes us back to our discussion on clause 3. In discharging his duties under the Bill, the regulator must take into account the fundamental duties that apply to the Secretary of State in ensuring the provision of a comprehensive and free at the point of use national health service. He must take into account those wide elements to any decision to change the configuration of services locally, which the disposal of protected assets might trigger. I hope that the hon. Gentleman is reassured by my affirmative reply.

Evan Harris: I am reassured, but I should like clarification that under clause 16(4) the regulator, under one of the conditions that the Minister described, could say that it was applicable to allow disposal of this property. However, if the regulator felt that it was necessary, he would be entitled to say, ''As long as it is offered for use by the rest of the NHS first''.
 Mr. Hutton: The current wording provides a very wide discretionary power to the regulator to attach whatever conditions he thinks appropriate, and it might well cover the point that the hon. Gentleman has raised.
 Question put and agreed to. 
 Clause 16 ordered to stand part of the Bill.

Clause 17 - Financial powers

Win Griffiths: We now come to amendment No. 263, but the hon. Member for Ealing, North (Mr. Pound) is not here to move it. Is someone prepared to move the amendment formally?

Simon Burns: On a point of order, Mr. Griffiths. The hon. Member for Ealing, North is the nearest that we have to a rebel in this Committee. Has he forgotten to be in his place, or has the Whip nobbled him because the Government do not like the amendments?

Win Griffiths: That was not a point of order.
 Amendment proposed: No. 263, in 
clause 17, page 7, line 34, after 'money', insert 'only'.—[Mr. McCabe.]

Win Griffiths: With this it will be convenient to discuss the following:
 Amendment No. 264, in 
clause 17, page 7, line 34, at end insert 'direct'. 
Amendment No. 18, in 
clause 17, page 7, line 36, leave out subsection (2) and insert— 
 '(2) The trust shall have no constraints on its right to borrow except as outlined in subsection (3)'. 
Amendment No. 161, in 
clause 17, page 7, line 36, leave out subsections (2) and (3) and insert— 
 '(2) The trust will have certain limits on its rights to borrow, as outlined in subsection (3). 
 (3) The trust's borrowings shall not endanger, or incur the loss of protected property, as outlined in section 16.'. 
Amendment No. 19, in 
clause 17, page 7, line 38, leave out subsection (3) and insert— 
 '(3) A trust's total borrowings shall not exceed 100 per cent. of its total revenues without the approval of the regulator.'. 
Amendment No. 146, in 
clause 17, page 7, line 38, at end insert— 
 '(3A) In calculating these limits, no regard shall be had to any borrowing incurred under the Private Finance Initiative.'. 
Amendment No. 21, in 
clause 17, page 8, line 6, at end add— 
 '(7) A foundation trust shall show the total value of all its liabilities on its balance sheet.'.

Chris Grayling: You will not be surprised to learn, Mr. Griffiths, that I do not wish to speak to the first two amendments in that group, but to amendments Nos. 18, 161, 19, 146 and 21.
 Amendments Nos. 18 and 19 need to be read together. They attempt to introduce a ceiling on borrowing limits to NHS foundation trusts, at a level that is generally accepted as prudent in the commercial world. A gearing level of debt to income of 100 per 
 cent. is a fairly standard measure of affordability for a private corporation. It establishes a much more prudent and sensible limit on borrowing than the restrictions that the Bill puts forward otherwise. 
 Frankly, we are concerned that the level of restriction on foundation trusts' ability to borrow cuts away and undermines many of the benefits that foundation hospitals experience in other countries, where they have much greater control over their own financial affairs and are not subject to centralised prescription over what they can and cannot do financially. It is our view that the Government's approach—that hospitals can have freedom, but freedom in a straitjacket—which is applied to many sections of the Bill, is wrong and flawed. That is ironic, because the Government have had a difficult time with the Bill. There has been a Back-Bench rebellion, although not, sadly, in the Committee. However, we know that those Labour Members who sought to express themselves in the Chamber about the principles of the Bill were not given the opportunity to bring those arguments to the Committee.

Mike Hall: On a point of order, Mr. Griffiths. Some of those who did not vote for the Bill in the Chamber refused to serve on the Standing Committee.

Win Griffiths: We have all heard that comment.
Chris Grayling rose—

Mike Hall: The hon. Gentleman should withdraw what he just said.

Win Griffiths: Order.

Chris Grayling: I suspect, Mr Griffiths, that I would be trespassing beyond your strictures if I were to be diverted down that route.
 We must not restrain foundation trusts from delivering a high-quality service. The Government are getting the worst of both worlds; they have all the difficulties of convincing those who are doubtful about the rights and wrongs of foundation hospitals, and all the political difficulties that that brings with it. However, they are also failing to implement effectively the principles of foundation hospitals. They are not giving foundation hospitals the freedom to truly deliver improved services. They are placing them in a position in which they will be able to make improvements only at the margins. That will ultimately be a lost opportunity. 
 We want to put our view on record that the constraints in the Bill are far too great. Borrowing should be an area in which there are much greater powers—within the control of the governing bodies and boards of directors of foundation hospitals—and where the limits placed on borrowing should be prudent rather than prescriptive. The measures that would implement the prudential code, which will place limits on authorisation, are almost certainly going to be highly prescriptive, and will not give hospitals the real freedom to innovate, to expand and to develop 
 their services. There is a powerful opportunity, but the Government are failing to offer hospital trusts the chance to take advantage of it. 
 Amendment No. 146 is a probing amendment; it is none the less extremely important. Many of the hospitals that seek foundation status will have been involved with PFI projects on either a small or large scale during the past few years. Many of them have built up substantial liabilities that must be repaid across a 20 or 30-year period. Some will be entirely new hospitals, which have been PFI-funded to the tune of hundreds of millions of pounds. The typical bill for a new hospital is anything between £200 million and £400 million. The recent building of new hospitals—or substantial additions or modernisations to existing hospital buildings—has been carried through the PFI scheme. The PFI scheme brings with it substantial long-term liabilities with regard to debt repayment and the provision of services by third-party providers. By any stretch of the imagination, these liabilities are as substantial as a conventional bank loan or debt payment. 
 What is the position for those trusts? How will the overall borrowing framework that the Government intend to set up through the regulator reflect the long-term liabilities that have been built up through PFI? Will the prudential borrowing limits imposed on a hospital trust reflect those liabilities? It is conceivable that a brand new hospital, with a huge liability to repay debts for its buildings, would have the ability to carry on borrowing if the PFI element was not reflected in the prudential code. That hospital could then increase its liability and increase the challenge in finding the funds to repay its liabilities. 
 On the other hand, an older hospital without the new buildings would find itself less able to develop, modernise and improve for the future. We touched upon that in an earlier debate, but we still do not truly understand the status of PFI and PFI liabilities as part of the borrowing framework. This amendment is designed to extract from the Minister some clearer indications as to how those liabilities will be handled. 
 Amendment No. 21 states: 
 ''A foundation trust shall show the total value of all its liabilities on its balance sheet.'' 
In recent years, the Government's favourite way of spending money without admitting it has been to shift it off-balance sheet. Across the public sector, substantial liabilities have been built up that do not appear on the national books. The public sector borrowing requirement figures each year—the total national debt—do not reflect the tens of billions of pounds of liabilities that the Government have built up through PFI and through other off-balance sheet schemes. 
 My party does not want to see the future of the national health service being built on the back of off-balance sheet accounting. This amendment is designed to write into the Bill a simple and straightforward provision; that the balance sheets of an NHS trust should reflect all of its liabilities, whatever those may be. That is not something that is practised in the 
 Exchequer today, but it should exist on the balance sheet of these books. I hope that the Minister will accept that principle.

Stephen McCabe: I should be grateful if the hon. Gentleman clarified something for me, because I may have misunderstood. Am I correct in thinking that he is saying that total liabilities should be shown but that, for the purposes of additional borrowing, they should be discounted? Is that a logical position to adopt?

Chris Grayling: No, I am not suggesting that they should be discounted. Amendment No. 146 is a probing amendment; it is there to clarify the Government's position and to seek an explanation from them regarding the status of the PFI debt within the borrowing framework. Amendment No. 21 is a direct request to the Government to have the books of an NHS foundation trust show all of its liabilities. If the trust owes £300 million for its new hospital, it is not unreasonable that we should be aware of that.
 In accounting terms, there are many forms of off-balance sheet debt that do not need to be shown formally in the structures of a balance sheet. That does not mean that good governance should not require the trust to say, ''And, by the way, we have these liabilities as well''. That is what we are seeking to achieve. That does not happen at national level; it is not reflected in 
 the PSBR figures. There should at least be a line underneath the figures that says, ''We also owe all this extra money to our PFI provider for the new wing that we built last year''.

Evan Harris: I understand the point that the hon. Gentleman is making about amendment No. 21, and I agree with it. I am confused, however, about his position on amendment No. 146, although I understand the nature of probing amendments. Does he believe that regard should be had to liabilities incurred under the PFI that would show on the balance sheet if amendment No. 21 went through?

Chris Grayling: I am simply seeking clarification from the Government about what will happen to the liabilities. My own view, as set out in amendment No. 21, is that a foundation trust should show the total value of all its liabilities. The real question, which underlies amendment No. 146 and the previous two amendments, is whether we are going to tell a trust that has a new wing or a new hospital, and has already gone beyond the total liability amount permitted by the regulator under the prudential code, that it cannot borrow anything again, because it has already built a new wing.
 It being One o'clock, The Chairman adjourned the Committee without Question put, pursuant to the Standing Order. 
Adjourned till this day at half-past Four o'clock. 
Griffiths, Mr. Win 
 (Chairman) 
 Anderson, Janet 
 Bailey, Mr. 
 Burnham, Andy 
 Burns, Mr. 
 Burstow, Mr. 
 Calton, Mrs. 
 Casale, Roger 
 Dowd, Jim 
 Fitzpatrick, Jim 
 Gillan, Mrs. 
 Grayling, Chris 
 Hall, Mr. Mike
 Harris, Dr. Evan 
 Hepburn, Mr. 
 Hutton, Mr. 
 Jones, Mr. Jon Owen 
 Lammy, Mr. 
 Lansley, Mr. 
 McCabe, Mr. 
 Murrison, Dr. 
 Pound, Mr. 
 Russell, Ms Christine 
 Thomas, Mr. Gareth 
 Ward, Claire 
 Young, Sir George